why minemakers is the best phosphate play, page-10

And another reason why......

Courtesy of fundmymutualfund.com

We haven't spent much time talking about our "World of Shortages" themes since the commodity indexes have crashed, with hedge fund deleveraging being one of the main culprits. Certainly demand destruction is part of the theme as well. However, the implications as we look out past the short term remain dire. What is going to happen across our commodities complex is a lack of investment as prices are too low to make profit; which will exaggerate shortages. And raise prices in the future (again). This will be a replay of what we saw about 9-18 months ago but I believe the next wave will be larger, more stark, and potentially with far more dire consequences for many. What we saw this past spring was scary enough - we pointed to the themes of food protectionism, social unrest, and the like - the drops in commodity prices of late are masking the situation coming in the future. [Jun 29: NYTimes - Hording Nations Drive Food Prices Ever Higher] [Apr 14: WSJ - Food Inflation, Riots Spark Worries for World Leaders] [Mar 31: Reuters - Tensions Rise as World Faces Short Rations] [Feb 13: As Asia Food Prices Bite, Analysts Warn of Worse to Come]

Again, the stock market focuses so much on the short term and I believe on this one is missing the forest for the trees. It's just a matter of timing... is it latter 2009? mid 2010? Too difficult to call right now... but this will be yet another crisis. One which will repeat over and over in the coming decades as human population growth and urbanization [Mar 24: WSJ - New Limits to Growth Revive Malthusian Fears] conflict with supplies of food... hence I continue to favor agricultural themes as the best long term play on my radar - even if they've been tossed to the curb along with all "global growth" stocks. As with everything in this market, we have a clear thesis on a long term trend but when investors switch from their infatuation with what lays ahead in the next 3-9 months, and look to the intermediate term future (12-36 months) is the open question.

I still believe if you have a 30 year time horizon the best investment is global farmland - and some very smart money is agreeing with me [Jun 14: Bloomberg: Farmland Reaps Bonanza for TIAA] [Jun 5: NYTimes: Food is Gold, So Billions Invested in Farming]

Some stories on this ....

Bloomberg: Food Prices Will Rise, Causing Export Bans, Riots
Food prices will rise next year, prompting a revival of protectionism from food-growing nations and risking a renewed bout of rioting, according to Jochen Hitzfeld, an analyst at UniCredit SpA in Munich.
“Agricultural commodities will outperform the broad commodity indices in 2009,” Hitzfeld wrote in a research note this week. “If key crop-producing countries then impose export bans again and speculators drive up prices via physical stockpiling and futures contracts, new food unrest is even conceivable in the second half of 2009.”
The CHART OF THE DAY shows food prices for the past 10 years as measured by an index compiled by UBS AG and Bloomberg that tracks at least 13 foodstuffs, including wheat, soybeans, sugar, cocoa and coffee. The index has declined 35 percent since peaking in July.
“The prices of many agricultural commodities are now clearly below their production costs,” Hitzfeld wrote. “We expect the coming year to bring a cutback in area under cultivation as well as a decline in the yield per hectare.” (this is the important point, which the video below shows specific to rice in the Philippines - if this sort of cutback happens in energy; you are faced with brownouts or blackouts. When it is food, on the other hand, you have rioting)
Link to agricultural price index graph here

NBC News: Rice in the Philippines - Promise and Neglect (note this story focuses on 1 country but in greater Asia, rice is the main staple so the issues here are reflective of the fastest growing region on Earth)
A morning with Dr. Zeigler at the Philippines-based IRRI leaves you wondering how the world could possibly be facing food shortages, but travel just a few miles from here and there is a very different picture.
Rice farmers are abandoning their land, unable to afford the new seeds. Half the paddies in this area lack irrigation, and few farmers have basic storage facilities. The soaring cost of fertilizer and pesticides have eaten into the small profits they could make from rice, pushing them into debt.
"There's no money in it, there's no point," said Sionong, whose family had been rice farmers for three generations. She's converted her paddies to blue grass for the lawns of housing developments, which are also replacing the paddies. Another farmer told me: "Maybe after ten years, we won't have any rice farmers any more."
The farmers here have little real power. The local market is controlled by three powerful traders, who buy at a price they set, and who sell the fertilizer and other inputs. They have the storage facilities and the driers which add value to the rice.
In thirty years, the Philippines has gone from being a rice exporter to the world's biggest importer, unable to keep up with a population that has almost doubled to 90 million over that period. (remember population growth worldwide continues each and every day, even as we obsess with demand destruction from this global slowdown - the world still marches on, bringing online a good many humans each day, week, month, year - here is one country where the population has doubled in 30 years)
When world food prices soared earlier this year, the Philippines was one of the hardest hit, scouring world markets for expensive rice in a bid to head off a crisis that threatened to bring down the government. Although prices have fallen somewhat, during our visit they were still double than those of a year ago. A costly subsidy program was calming the poor districts of Manila.
"Rice is central to the fabric of Asian societies," Zeigler told me. "In terms of economic security, political security, economic growth, if you don't have abundant rice supplies, you can kiss goodbye to that stuff."